EU chems warn of 'carbon leakage' despite revised ETS proposals

20 December 2010 16:58[Source: ICIS news]

LONDON (ICIS)--Europe’s chemical industry is threatened with “carbon leakage” - the relocation of production facilities to other regions - despite what are seen as improvements to current EU climate change proposals, a Cefic panel chairman said on Monday.

In a statement, Cefic said it appreciated the decision by the European Commission’s Climate Change Committee (CCC) on 15 December to lower the threshold for free allocation of carbon credits to new capacities compared to earlier draft proposals.

The CCC is making recommendations on the framework conditions under which the EU ETS will operate from the start of 2013.

Chairman of Cefic’s energy and climate change programme council, Hans-Ulrich Engel, said, however, that the proposals would still damage EU chemicals operations.

“Despite the improvements through the CCC vote, the chemical industry in ?xml:namespace>Europe - and even the most efficient companies - will be faced with substantial additional costs compared to competitors producing outside the European Union,” Engel, who is a BASF executive board member, said.

“This distortion of competition leads to our continued request for a global agreement on the reduction of greenhouse gas emissions and a level playing field. Overall, the ETS setup will not fully avoid carbon leakage.

“The EU sector’s competitiveness in a global market and decisions on where future operations will be located will be negatively impacted. And what concerns us most is that despite all the improvements in the rules, growth investments in even the most efficient installations cannot fully count on free allocations.”